Monday, January 12, 2009

AGO, ROM, OCAD ask Gov't to Make More Donations Tax Exempt

Yesterday's Toronto Star featured a full-page ad of interest to anyone who wonders how the recession will affect Canadian cultural institutions--or how desperate those institutions might be to ensure that the recession's impact is minimized.

The ad took the form of an open letter to prime minister Stephen Harper and finance minister Jim Flaherty, and was signed by the CEOs of the Art Gallery of Ontario, the Ontario College of Art & Design, and the Royal Ontario Museum, as well as reps from Toronto universities, theatre co's and music orgs.

The letter requested that the upcoming January 27 budget change Canada's tax laws to soften "unprecendented challenges [to charitable organizations] as a result of the global financial and economic crises". How? By creating more tax exemptions, namely (1) exempting gifts of private company shares from capital gains taxes (2) exempting gifts of real estate from capital gains taxes (3) allowing "non arms length" stockholders like family directors and CEOs to give stock option shares to a charity within 30 days.

To be clear, there are already zero capital gains taxes applied on gifts of publicly traded securities in Canada. And real estate and private company shares are already tax exempt in the US.

It's unclear the extent to which museums and art colleges would benefit from such measures. But one guesses it would have to be substantial to support this initiative--as well as engage in such cheeseries as
"Now is the time to level the playing field with the US and unlock greater private wealth for the public good!"

As a backgrounder, here's the basic requirements for maintaining charity status in Canada: Note that any charity must "Limit using the charity's resources for social activities and fundraising activities as they generally are not considered charitable." -- I wonder how the AGO, OCAD and the ROM managed this limitation when fundraising for their considerable renos.

Image on "Maceration of Money" from George Eastman House Collection @ Flickr commons


Gabby said...

This is an interesting development that's been a long time coming, in my mind. It's something we talked about a lot in a class I took in Arts and Media Management at Schulich last year. I often think it's weird that contributing to a Canadian film or television production gets one major tax credits, but donations to galleries, museums and non-profit arts organizations does not.

Oh, and as for limiting spending the charity's resources on fundraising or social events, I think there are a lot of ways around that. Endowment funds, for instance, are totally separate from charitable donations (as far I remember). Also, many charities establish separate foundations, which operate under a different set of laws than the charity, which can administer their funds to things like fund raising parties or building renovations. There's some complicated legal distinction between charities and foundations that I don't totally remember, but can dig up.

Leah Sandals said...

Hmmmm. Thanks for the info Gabby. I knew there must be some accounting means of getting around the fundraising regulations but I didn't previously know they existed.

I think donations to "charities" of any kind do get tax receipts, don't they? I always thought of those as tax credits. Though what the museums here are asking for is that they not have to pay taxes on donations of shares... a bit of a different thing.

I agree this must have been a long time coming and these institutions simply gauged, given the economy and the coming budget, that it could be a good time to press for saving taxes on their part.

Gabby said...

Sorry, I should have been clearer: donations to charities to get tax receipts, but they're not as good or as large as the tax credits that people donating to film/television get. Charity donations max out at a certain level, whereas donations to film/television entirely pay for themselves, in any amount (this is all a little hazy and might not be entirely right, but I know they're not equal and that arts organizations have been complaining about it for a while now).

Leah Sandals said...

Huh, interesting... I never caught the film-museum differences before. So unfair... movie people are more famous and glamourous than museum workers and art profs... and get more tax credits to boot!

I await justice.